In most small businesses, the owner and/or manager wears a number of hats, from human resource director to chief salesperson to problem solver. Sometimes, he or she has training in those fields, but often he or she is a good manager and/or salesperson with little legal or HR training. That can get a business owner into trouble and cause him or her to make unintentional legal mistakes. Avoid the most common of these by keeping these top three legal mistakes in mind.
Things that small business owners do that can land them in legal trouble
1. Not establishing firm, written HR policies from day one. It's easy, as a company grows, to just hire people based on your "gut" reaction. However, as your company expands, this can lead to inconsistent hiring and disciplinary policies. You can get into legal "hot water" by allowing one person to do something that you fire someone else for doing. In addition, "gut reaction" hiring can lead to unintentional racial, religious or gender profiling, another "no-no."
2. Not setting your company's legal structure up for growth. When you're just starting out, it can seem inconceivable that one day you will have multiple locations, dozens of employees and hundreds of thousands of dollars in sales. Because of that, many small business owners opt to set their companies up as a sole proprietorship. It's quick and easy that way and there are few legal fees involved. However, as a company grows, remaining a sole proprietorship can put the owner's personal assets at risk as well as lose him or her the opportunity for some tax advantages.
3. Trying to handle legal disputes by yourself. If you've been in business long enough, it's inevitable that you're going to have some type of legal dispute. Maybe it's a dissatisfied customer. Maybe it's an employee who feels he or she has been terminated unfairly, or maybe it's a dispute with a supplier. Whatever the issue, if you've been contacted by an attorney, you need to hire your own lawyer to respond to them. There are many good reasons for this. Among them is the fact that attorney/client conversations are privileged, but if you talk directly to the opposing attorney, he or she can use your conversation against you in court.
No one expects a small business owner to be a legal genius as well as a good manager and salesperson. However, it's wise to consult with a good business attorney even when you're just starting out to make sure that you get your business structured for growth, that you have written and firm HR policies and that you hire an attorney from a firm like Baudler, Maus, Forman, Kritzer & Wagner, LLP to answer any legal disputes.
Share31 March 2015
When I started my first small business, I had no idea how much I really didn’t know. I was fully prepared to deal with customers, sell product and even handle complaints and returns. What I wasn’t aware of was that there is so much more to it. I was lacking the legal expertise to protect the company and myself. I wanted others to benefit from my experience, mistakes and lessons learned, so I started this blog. From employment law to the legal business contracts you’ll have to sign when you form partnerships, business law is complex. I hope that the information here will help you to be better prepared when you start your business so that you’ll know when you need to call an attorney and when you can handle things yourself.
